Homeowner Scenario: Lien and Lien Position

Homeowner Scenario: Lien and Lien Position

Homeowner Scenario: Lien and Lien Position The bank lien is the reason the bank is allowed to sell your home in the event of a foreclosure. It can get a little complicated when there is more than one lien though. This video is meant as an ...

Homeowner Scenario: Lien and Lien Position

The bank lien is the reason the bank is allowed to sell your home in the event of a foreclosure. It can get a little complicated when there is more than one lien though.

This video is meant as an educational resource to prepare borrowers for the loan process.

Depending on the state and legal circumstances surrounding the lien on a real property, a lien can commonly be referred to as a mortgage, deed of trust, promissory note, or a security instrument. For the purpose of this article the term “mortgage” will be used to refer to all types of liens against a real estate property.

When a lender is in a first lien position, it means that they are in the first or priority position to benefit from any liquidation of the collateral which secures the loan, in the event that the loan is in default and the property is to be sold. An example of a first lien position would be the bank which holds the original mortgage on your property. The term primary lien holder refers to the lender who retains the first lien position.

A lien is a legal security interest in real or personal property, created and publicly recorded for and until the satisfaction of a debt or mortgage. The lien is an encumbrance on the property, and can prevent the transference of the property.

In general, a mortgage that is recorded first against a real property will have priority. This is a valuable position to have when a borrower obtains a second mortgage against their property, such as a line-of-credit secured by the property. Some borrowers even manage to place third lien positions against their property.

The vast majority of lenders will provide loan financing on a collateralized loan only if they will have the first lien position; to determine any existing liens against a property, a lender will request a title search against the property.

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